How Does Affirm Make Money: Affirm Business Model

Affirm is a FinTech business that offers consumers point-of-sale loans. It offers short-term loans up to six months through collaborations with businesses, including Walmart and Shopify. If you are looking to invest in this company or checking out their credibility, then you are at the right place.

In this article, I will give you details on how Affirm makes money, explaining to the Affirm Business Model to better understand the intricacies of the upcoming fintech business. So, let’s get down to the details of this and start learning.

What is Affirm?

Affirm is a FinTech business that offers consumers point-of-sale loans. It offers short-term loans up to six months through collaborations with businesses, including Walmart and Shopify. Affirm’s customers transact with the company directly via its website or mobile app. Customers pay interest on their loans, which is how Affirm makes money.

The company’s yearly percentage rate is 18 percent on average. Affirm also charges merchants a portion of the selling price to process payments and accepts the risk of default.

Since its inception in 2012, Affirm has evolved to become one of the world’s most well-known consumer loan firms. The organization now has over six million clients and collaborates with over 3,000 shops around the country.

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What is the history of Affirm?

The Affirm business began in 2012, when one of PayPal’s founders, Max Levchin, a Ukrainian-born American entrepreneur, and other investors launched a fintech company to loan money to clients, resulting in a new means of purchasing things without having to spend money right away.

The firm’s concept was certainly promising at the time, but the start was a little slow, and it took a long time for the company to attract a reasonable collection of partners with whom to collaborate and sell their services once it was founded.

In 2014, Levchin became CEO of Affirm, launching a reorganization plan to restructure the company’s administration, launching an advertising campaign to publicize them, and investing in technology to modernize Affirm processes.

As a consequence of these efforts, their first app was released, allowing clients to use their lending services at online stores. The debut was a success, putting Affirm in the limelight in the financial and technological sectors, leading to a formal agreement with Walmart, the largest retailer in the United States, providing a new payment option to Walmart consumers.

Following growth in its partnership base in 2020, the firm chose to enter the stock market, stating its plan to prepare for an initial public offering in November of that year (IPO). The talks were completed in 2021, and on January 13, Affirm was listed on NASDAQ for the first time, raising around US$ 1.2 billion in its first public offering.

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Affirm’s reputation expanded even further following that occasion, as did the number of firms interested in partnering with them. The rapid growth of their income and enhancements to their services piqued Amazon’s interest, prompting them to form a deal with Affirm, which will become Levchin’s company Amazon’s exclusive “buy now, pay later” partner.

What does Affirm do?

Affirm is one of the oldest POS loan companies, having been founded in 2012 by Max Levchin (CEO), Jeffrey Kaditz, and Nathan Gettings and located in San Francisco. In the United States, Affirm has over 6 million clients and over 11,500 retailers in its partner network.

Affirm is a company that specializes in providing millennials with quick point-of-sale financing. Unlike rivals like Afterpay, Affirm charges an APR on each transaction, providing complete transparency on the entire loan amount at the point of sale and no hidden costs.

Loans are underwritten using an AI-based system to discover the best financing choices and swiftly create loan terms. The firm continues to develop its user base and quickly onboard new merchants thanks to its flexible financing alternatives, making it one of the top POS loan companies in the world.

How does Affirm work?

This fintech start-up provides consumers with point-of-sale (POS) loans through its network of partner merchants. Customers can use Affirm as a payment option to check out with an online or brick-and-mortar retailer.

Affirm evaluates the customer’s application and calculates an APR based on the FICO and other expenditure information. If accepted, the consumer will be given a loan for up to $17,500 with payback choices ranging from 3 to 36 months.

Affirm settles the account with the merchant and underwrites the loan with the consumer directly. Affirm has approximately 11,500 merchant partners across various industries as of March 2021, including fashion, dentistry, electronics, car, travel, and others. Adidas, Peloton, StockX, Walmart, and Eventbrite are just a few of the top merchant partners.

Customers pay to Affirm directly in installments, with APRs ranging from 0% to 30% based on the applicant’s financial and credit situation. There are no costs for account creation, late payments, servicing, or prepayment, one of the most major distinctions between Affirm and other POS businesses.

Before providing the POS service, Affirm does a mild credit check on the consumer. On the other hand, the credit check has no impact on your credit score or credit standing with the credit bureaus or institutions. If the consumer takes out a loan with Affirm, any late or missing payments will be reported to the credit bureau.

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According to Affirm, retailers who add Affirm to their payment options see an 85 percent yearly boost in orders, as well as a 20% increase in recurring consumer transactions.

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How does Affirm make money?

Affirm earns money from two sources: consumers and merchants. They charge clients an interest rate and merchants a processing fee on loans they provide.

Interest income

Affirm makes money from the loans the company makes to customers. Although there are no fees, the corporation does charge interest on its POS loans. The annual percentage rate (APR) can range from 0% to 30%. While the typical Affirm loan has an interest rate of 18 percent, over 43% of loans have no interest rate.

The applicable rates are determined by the terms of the merchant agreement and the buyer’s creditworthiness. According to Affirms, the typical loan size is $750, while the company provides loans up to $17,500.

All Affirm loans are underwritten by Cross River Bank, Celtic Bank, or Affirm Loan Services. This method allows Affirm to issue more loans and earn greater margins in the long run. Unlike many other point-of-sale lenders, Affirm does not guarantee loan acceptance.

Affirm may examine its prospects using a complicated algorithm before issuing a loan with acceptable conditions for the customer’s credit risk. The following are some of the data elements that the firm considers when determining the credit rating of each customer.

  • Economic situation at the moment.
  • Credit rating.
  • Affirm payment history.
  • The length of time a consumer has been a customer of Affirm.
  • The interest rate that the merchant is willing to provide.

Affirm claims that its technology guarantees that borrowers repay most loans taken out on the marketplace.

Merchant fees

While Affirm charges customers an annual percentage rate (APR), there are times when the company offers 0% APR financing. The merchant in this situation covers the transaction fee. Affirm does not specify how much it charges for merchant fees, however, it is often assumed to be between 2% and 4%. Fees are calculated based on the merchant’s predicted sales volume, purchase price, and product category.

The merchant fee takes care of the payment procedure, allowing the merchant to get reimbursed in two days, and subsidizing Affirm’s risk in the transaction.

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What partnerships does Affirm have

Walmart and Shopify are two of Affirm biggest collaborations.

Walmart and Affirm Partnership

Affirm and Walmart announced their relationship in February 2019. Affirm will be available in all 3,570 Walmart in-store supercentres as part of this partnership.

Shopify and Affirm Partnership

Affirm announced in July 2020 that Shopify will join with them to be the official “Buy now, pay later” payment option for all 1,132,470+ Shopify shops in the United States.

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What is the Affirm business and revenue model?

To generate a profit, Affirm employs several revenue models, which they integrate inside their company:

  • Commission based business model
  • Interest revenue model
  • B2B2C (partnerships) business model

Faqs on How Does Affirm Make Money: Affirm Business Model

What is Affirm?

Affirm is a FinTech business that offers consumers point-of-sale loans. It offers short-term loans for up to six months through collaborations with Walmart and Shopify.

How Does Affirm Make Money?

The majority of Affirm’s revenue comes from flexible repayment options with interest charged to online customers. The program allows online consumers to pay for purchases in installments over up to 36 months. The annual percentage rate (APR) for such transactions is between 10% and 30%.

How does Afterpay Affirm make money?

Fines charged to merchants, late payment fees, and cost-per-click advertising are all ways that Afterpay gets the money. Furthermore, income is generated through the company’s international subsidiaries, notably Clearpay, which is based in the United Kingdom.

Is Affirm profitable?

Despite the fact that Affirm’s earnings were tweeted out before the market closed, the company ended up having a strong second quarter. Revenue increased by 77 percent to $361 million in the quarter, exceeding roughly $30 million estimates, resulting in an 8 percent revenue increase.

How much revenue does Affirm make?

In 2019, Affirm made $510 million in revenue.


Affirm is a fintech company that has come to stay especially in the current fast-growing tech world and with solid revenue models in place, it is bound to stand the tests of time and stand out among its peers.

So, if you are just an enthusiast looking to know more about Affirm, I hope this article fills you in on all you need to know about Affirm.



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